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14 June 2010



Here's a link about sunk costs that I just came across:


I tend to use these two examples:

1) You go out with the fam to a nice restaurant for dinner. You start feeling really sick for some reason. Do you eat the $40 steak? But you have to pay for it now that you've ordered, it right?! No, you'll feel much better if you just sip your water then go home even if you have to pay for something you don't eat.

2) You have a vacation to Williamsburg, VA planned and paid for. At the last minute something else comes up that must take precedence. Do you go through wi8th the vacation because you've paid for it? No, you attend to whatever it was (you fill in the blank that came up).

3) An example from the firm - There is a single printer in the office and it is pretty lame, doesn't scan pdf, is slow etc. Do I use that printer since we already own it etc. or do I use the "community" printer upstairs even though it will cost 9 cents a copy? I use the printer/scanner upstairs. In the end it's a better use of my time/resources to do that rather than waste a half hour or more trying to figure out the printer that is paid for.

Maybe those examples help?

David McGinnis

The example I use most is garage sales.

It's really interesting to see what prices people put on CRAP. They usually justify the asking price based on the original price. Needless to say this serves as an example of what NOT to do. When pricing items in a garage sale, you have to ask "what might somebody be willing to pay for this... today?" You can sell items you got for free for a hundred bucks and items you payed 20 dollars for for 50 cents. It doesn't matter what it cost, it matters what it's worth. I think garage sales are pretty easy to wrap your head around.

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